Breaking up not so bad for ITT Corp.

Defense unit goes independent with stronger government focus

Look for a leaner and meaner ITT Defense and Information Solutions in the next year.

ITT Corp. announced earlier this year that it would separate its businesses into three distinct, publicly traded companies. ITT officials expect to finalize and execute the plan before the end of the year. “Each new company will be more nimble and able to build stronger, more intimate customer relationships to accelerate mutual success,” said ITT chairman, president and chief executive officer Steve Loranger when the plan was announced.

ITT is ranked No. 16 on the Washington Technology 2011 Top 100 list with $2.1 billion in prime contracts.

Under the plan, ITT’s Defense and Information Solutions (DIS) unit will be renamed and become a standalone company that supplies technology and operational services to global government, military and commercial customers. “We’re still working out the new name internally,” said John Shephard, vice president of strategy and development for DIS.

Shephard said that splitting ITT into three independent companies will let each of the new corporations “really focus on their individual businesses.” At present, about 70 percent of DIS’ business derives from Defense Department contracts. As DOD looks to shave billions of dollars from its budgets over the next five years, Defense and Information Systems is well-positioned to adapt to cuts in spending and tackle the department’s shifting priorities, Shephard said.

“Ultimately, the surge of funding that we saw from DOD for the last decade was bound at some point to return to more normal growth rates” or even flatten or decline, he said. “We pay close attention to where we see DOD funding going and where DOD’s priorities are and how we align with that in terms of our business areas. We see a lot of alignment in what we do with where [DOD] is going.”

One example, he said, is in the “data to decisions” area, a technology priority identified by Defense Secretary Robert Gates earlier this year. Data to decisions is “essentially reducing the cycle time and manpower requirements for analysis and the use of large sets of data,” Shephard said.

Last year, the company acquired EchoStorm Worldwide, which specializes in innovative video and data management technology, bolstering its portfolio under data-to-decisions priority.

EchoStorm’s “forte is software specifically addressing the issue of data compression from the vast amount of information that comes from full-motion video surveillance to allow much more efficient analysis of very large quantities of data,” Shephard said. “We see that as an area of focus and growth for us and [aligning with] DOD’s needs.”

DIS also will continue to concentrate on growth beyond the defense arena, Shephard said, noting that it has increased its role as a “major player” in Federal Aviation Administration contracts in the last year. In May 2010, DIS was awarded a five-year, $1.4 billion contract under FAA’s Next Generation Air Transportation System (NextGen) initiative to lead a team of aviation industry companies in developing “advanced concepts” for all aspects of air traffic control management. DIS also holds a contract to deploy and operate FAA’s Automatic Dependent Surveillance-Broadcast system, the cornerstone technology of NextGen.

DIS expects to compete for other portions of the NextGen system, Shephard added.

DIS’ overall strategy as an autonomous company will be to center its business efforts on areas of “long-term, enduring growth” across the military, government and commercial sectors, Shephard said.

“As we think about our strategy going forward as an independent company, we’re going to focus on a very disciplined approach to managing our portfolio to ensure that we continue over the long term to be well-matched with the priorities of our prime customer, the Department of Defense, but also with [those of] our growing, non-DOD customers,” he said.

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